China is the epicenter for BRICS economies, except India. The Chinese economic slump means a drag on Russia, Brazil and South African economies. This is because strength of external economies of these countries depend largely on China’s growth. With China slowdown in growth and concern looming large over its slipping into recession at not far distant, paranoia over the economies of Russia, Brazil and South Africa is rising.

China is the biggest export destination for two BRICS countries – Brazil and South Africa and second biggest destination for Russia. The worst affected will be Brazil. In 2014, China accounted for 18 per cent of Brazil’s exports. The most important export earning of Brazil world export is iron ore. Around 47 per cent of Brazil’s export of iron ore went to China in 2014. The fall in the steel output in China owing to overcapacity and bubble burst will lead to drop in imports of iron ore by China and will impart a big negative impact on Brazil economy.

Similarly, China is second biggest stakeholder of Russia’s oil export. Oil is the biggest export earning of Russia. In 2014, it accounted for 70 per cent of Russia’s world export. China accounted for 15 per cent of Russia’s oil export. Therefore, China is the pivot to Russia’s export. Given China’s predominance in Russia’s oil export, drop in oil import by China has hit Russian economy, which is already in recession.

China is the biggest trade partner of South Africa. In 2014 it accounted for 10 per cent of South Africa export to the world. Iron ore is the second biggest item of South Africa‘s export to world. China was the biggest destination of South Africa’s iron ore export. It accounted for 59 per cent of South Africa’s iron ore export. The slump in steel manufacturing in China will unleash a major impact on South Africa’s iron ore export.

BRICS was never significant in terms of India’s export trade. It accounted less than 10 per cent of India’s export in 2014-15. The significance attached to BRICS for India was the setting up of BRICS Development Bank to finance its infrastructure projects and Contingent Reserve Arrangement. The need for setting up BRICS development bank, named National Development Bank (NDB), arose when India was running from pillar to post for long-term finance for its infrastructure projects , but was ripped off for its coal base power projects.

India is under dire needs for infrastructure investment fund. India needs US$ 1 trillion investment for infrastructure development. Electricity is the most important infrastructure. In India, over sixty-five per cent of electricity generation is coal-based. It‘s need for investment is paramount. Domestic resources are not enough. Bilateral aid is small. Global financial institutions supports are imperative. But, the recent rider on funding coal based energy turned a major barrier for India to get a pat on shoulder. World Bank, IMF and ADB were averse to provide fund for coal based power projects, which poses danger to clean energy. Since 2012, World Bank did not sign any memorandum of understanding for coal fired electricity projects with its member countries. ADB was selective in supporting coal based energy projects.

However, BRICS does not loose much of its importance to India in the wake of Chinese slowdown in the economy. This is because BRICS development bank can prove boon when the global financial institutions are in financial turmoil after the slump in European Union. National Development Bank and Asian Infrastructure Investment Bank (AIIB) are synonymous in their objectives. Both were set up to fund infrastructure projects. NDB plus AIIB will pose a challenge to Bretton Wood institutes - World Bank and IMF. Bracketing NDB with AIIB, India is expected to have more clout in Asian Bretton Woods in regulating the funds for its infrastructure needs.

NDB plus AIIB can be beacon of improvement of India-China relation. They will act as new platforms for amelioration through funding of projects. Mr. Narendra Modi is the first Indian Prime Minister, who attained greater primacy in China’s leadership. Mr. Modi turned more a friend to China than a foe. Mr Modi’s main interests are to court Chinese investment. China emerged one of the top global leaders for overseas investment. In 2013, it was the third biggest foreign investor in the world.

Given India’s high stakes, which will upgrade India’s position in NDB and AIIB than in ADB, a new challenge will be thrown to Mr Modi government to keep Japan and China’s zeal up for investment in Indian infrastructure. Both Japan and China showed eagerness to invest in Indian infrastructure after Mr Narendra Modi became the Prime Minister. China pledged US $ 20 billion investment in Indian infrastructure development in the next five years and Japan committed US $ 35 billion for different infrastructure projects within 5 years. Both offered financial and technical cooperation for high speed trains, bullet trains and development of Indian railway. (IPA Service)